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South Africa is en route to spend R1 out of every R7.5 in government revenue on sovereign debt interest repayments by 2020, according to Moody's Investors Service.
The ratings agency published its annual Credit Analysis for South Africa on Tuesday. This does not constitute a ratings action.
Moody's said that while SA's sovereign debt is "affordable by international standards", the share of government revenue consumed by interest payments - at 12% in the 2018 fiscal year - exceeds the median of other countries with the same Baa3 credit rating.
It said that while interest repayments as a share of revenue was high, SA's sovereign debt carried "relatively low risk thanks to its rand-denomination and long maturities."
The ratings agency expects interest payments as a share of government revenue to increase to 13.1% in the 2019 fiscal year, and 13.4% in 2020.
Baa3 is the lowest rung of investment grade. Other countries rated Baa3 include Russia, Romania, the Bahamas and Hungary.
Moody's is the sole major ratings agency to not have downgraded SA's sovereign credit rating to sub-investment grade, commonly known as junk.
It skipped issuing an much-anticipated assessment of South Africa's sovereign credit rating in March. It is expected to announce a rating action after the upcoming general election.
Moody's said SA's debt position worsens when contingent liabilities are taken into account.
"The wider public sector is highly leveraged with debt of around 15% of GDP in 2018, most of which is SOE debt, while the rest is local government debt."
Of the SOEs, Eskom represents the largest single risk for the government.
Finance Minister Tito Mboweni announced a three-year Eskom support package of R69bn in his maiden Budget speech in February. Over ten years, government aid may reach R150bn.
"Based on the government's track record of support to these SOEs in past fiscal years, we assess support from government to be strong at the very least, and sometimes even higher."
